Commentary, information, and intelligent discourse about the Irish economy

Treaty and future of eurozone

I wrote the following background piece in response to a request last week. It’s similar to John’s Compact Logic. My respondent wrote back: “So a Yes will facilitate EU growth policies, the exact opposite of the No position?”. I was also asked about the consequences of a Greek exit:

Adopting the euro as our currency was supposed to give us much greater stability than the fixed exchange rate regimes that preceded it.But if Greece leaves the euro, financial markets will no longer accept at face value a statement by a struggling country such as Ireland that it intends to remain within the single currency.We are likely to see a repeat of the Irish currency crisis of the early 1990s when markets lost their faith in the fixed exchange rate arrangement of the time and Irish short-term interest rates quadrupled over the space of a few months.

Ironically, the currency turmoil of that time was triggered by the outcome of a European treaty referendum but, for once, not one of ours.Everything had been proceeding smoothly towards the eventual introduction of the euro.Financial markets believed that Central Banks would intervene to any extent necessary to defend existing exchange rates and a speculative attack on a currency could not possibly be successful.All changed when Denmark voted no to the euro in June 1992.It was possible that France would do likewise in September. Suddenly the single currency was no longer inevitable.Sterling succumbed tospeculative attack and devalued, and attention shifted to Ireland.Over a billion pounds flowed out of Irish financial markets over the course of a few days and short term interest rates soared to almost 60 percent.

The Irish government tried to hold off the speculators.Currency control were reintroduced.The Central Bank raised its lending to the money markets more than twenty-fold to prevent mortgage and commercial interest rates rising by more than 4 to 5 percent.But this could not be sustained over the longer term as all the country’s foreign exchange reserves would be lost.Ireland succumbed to devaluation in January 1993.

The same turmoil, with a run on the banks and a massive risk premium on foreign lending to Ireland, would undoubtedly follow a Greek departure from the euro.The difference in the present case is that where then we had only our own Central Bank, we now have the European Central Bank with its vastly greater firepower.

The fact that numerous other countries would be calling on the firepower of the ECB at the same time, and possibly indefinitely into the future, is why the eurozone powers seem lately to have drawn back from the precipice of countenancing a Greek exit.

The ECB has recently shown itself ready to provide enough liquidity to stave off catastrophe.At the behest of the Americans, the IMF and now the French, the German government now seems to agree that austerity alone on the fiscal side will fail, just as it did in the Great Depression of the 1930s. But can the Germans be expected to run deficits to stimulate the European economy, or countenance eurobonds – which would put their own credit rating at risk – before the rest of the eurozone has promised to limit its borrowing?As a German politician said this week, “you don’t lend your credit card to someone who doesn’t know how to control their spending”.

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48 thoughts on “Treaty and future of eurozone”

In a remarkable discovery, historians have come across a hitherto unarchived stack of Evening Press newspapers from the era of Ireland’s punt devaluation in 1993. Here’s one article from the period —

“An Evening Press reporter went to the Northside to ask a shell-shocked public about their views on the punt’s surprise devaluation. One man on Shantalla Rd, “Bertie A.” (full name not used at his request) said that from now on he would be managing his finances in a mixture of sterling and dollars as well as punts.”

An interesting example of the disruption in financial decision making caused by exchange rate instability.

What a tragedy that turned out to be. Thousands were deprived of the spiritual growth which flows from prolonged unemployment as the nation grappled with the hideous problem of being a highly competitive exporter.

Would we endure such woe again if the EZ fell apart? Can we run the risk of finding out?

The notion that a 10% devaluation In Jan 1993 triggered an export miracle, is a fairytale.

Currencies were under pressure for months and in Sept 1992, the NYT reported: “In a move to defend the Swedish krona at all cost against speculators betting on a devaluation of the currency, the Swedish central bank raised its marginal lending rate on Wednesday to a shocking 500 percent. But the rate is imposed only on banks that insist on borrowing extra funds over the next three days. Almost none did.”

The WSJ recently reported on an interview with Anders Borg, Sweden’s finance minister (possibly the only male bank economist who could wear
an earring and a ponytail).

He waves away the notion that the so-called Swedish miracle is thanks to the country’s rejection of the euro. While it has been an “advantage” to let the krona float through Sweden’s ups and downs, “it’s not short-term exchange-rate movements that decide growth. It’s much more to do with fundamental structural issues.” He points to Finland, Estonia and Germany as examples of fixed-exchange-rate countries that have come through recent crises in “good shape. . . . Part of that is that they started to deal with their own structural problems much earlier” with reforms that looked “very much the same” as Sweden’s.

The ECBs superior firepower may seem impressive but the trillion euro they created recently was such an extraordinary event that we can’t expect it to be the norm. And yet the norm is what it will have to become in an are of low growth.

The ECB creating large amounts of money was an extraordinary event. It begs the question of who creates the money supply in the normal run of things. The answer is the banks create the money supply through loans and this obviously the route cause of the debt crisis.

Allowing the ECB or the individual bank’s to create money directly for their Goverents could provide an adequate money supply to return us towards full employment. Any other solution seems to involve further indebting an indebted economy.

“The difference in the present case is that where then we had only our own Central Bank, we now have the European Central Bank with its vastly greater firepower.”

Is there an expectation that the ECB friendly fire will be any more friendly next time?

“As a German politician said this week, “you don’t lend your credit card to someone who doesn’t know how to control their spending”.”

Neither do you insist that ‘someone’ should blow their credit limit out of the water, just to protect your own friendly bank that has made some very duboius investments. Or perhaps you do, if you are allowed to!

@michael hennigan
Sweden has still done devaluation nonetheless though right? Surely the euro is a bit of a exceptional case as regards currency values since clearly most of the periphery are no where near productive enough to be trading at parity with Germany et al. Its an artificial situation that’s out of sync with market realities

For the benefit of anyone who wants to know what happened to the Irish economy between 1993 and 2000, I’m pleased to note that the famous “Irish Hare” paper is available for $0.00. Click on the link below and scroll to page 10 of the paper, where Fig 2 tells the shocking story. Unemployment fell sharply and the current account deficit was converted into a surplus.

Who knows how many souls were turned away from the blessings of honest poverty into temptations which they need never have encountered if only they had not found jobs? Let us cling to Holy Mother Eurozone and avoid such risks for the future.

The more European leaders talked at a dinner last Wednesday, the grimmer Angela Merkel looked. One after another, they spoke out in favor of the joint assumption of debt and against the strict austerity course Berlin is calling for. The chancellor stared silently at the man who was responsible for this change of mood — France’s new president, François Hollande, who noted with satisfaction that there was “an outlook for euro bonds in Europe.”

Merkel disagreed, saying that euro bonds are not the right tool, but to no avail. Only a minority stood behind the German leader. Even European Council President Herman Van Rompuy said, at the end of the dinner, that there should be “no taboos,” and that he would examine the idea of euro bonds. “Herman,” Merkel blurted out, “you should at least say that some at this table are of a different opinion.”

Herm_Angie, “you really should not have allowed your sibling_banks to flood all those dodgy capital flows throughout the EZ to dodgy banks and expect the foolish citizenry of the EZ to pick up the tab – shur a swabian hausfrau could have told you that!” Do you think she would pick up the tab for 50% of the household budget to bail out the siblings? Not on your nellie – she would have simply bankrupted them.

The level of HYSTERIA from some of the Y-front proponents knows no bounds – the biscuit must go to Blair Horan who sounds as if he spent the weekend on continuous re-runs of The Rock Horror Picture Show on some really bad LSD.

@Paul
Then you would give your money power to a uncaptured CB / Financial sector who sometimes allies itself to “core” countries and corrupt politicians who give letters of comfort all over the shop.

@Kevin
Exporting is for Dorks who like to be exposed to external shocks whenever it arrives , its not a goal in itself ,or at least should not be – its a means to earn revenue… it does not build wealth.

Lets be clear here – the core is borrowing off our accounts , they can both keep their capital value and maintain low interest rates ,rather then merely maintain low interest rates.
This has enabled France to build a massive capital programme that will function to capture the flow when it is eventually released.

According to Goldman Sachs, France’s price level needs to fall 20% vis-à-vis the euro average. Italy by 10-15% and Spain 20% while Greece and Portugal face the need for deflation totalling 30% and 35%,

The Irish devaluation in 1993 coincided with Intel, Dell and other big FDI projects starting to export while in that decade indigenous exports stagnated.

“But can the Germans be expected to run deficits to stimulate the European economy, or countenance eurobonds – which would put their own credit rating at risk – before the rest of the eurozone has promised to limit its borrowing?”

This is the kind of false dichotomy that has dominated the treaty debate. It is very disappointing that most economists and commentators in Ireland fail to see this simple fact.

It is not about asking the Germans to hand over their credit card. The question that the Yes camp has failed to convincingly answer is why is there nothing on the ballot paper concerning bank resolution or the ECB’s mandate? Why is it focused on an aspect of policy that had little or nothing to do with the crisis outside Greece?

The reason, as everyone knows, that these things are not on the ballot paper is that Germany hasn’t the slightest intention agreeing to such measures. It has taken huge pressure from the whole world to get them to even talk about these issues. As it stands, Germany has very little incentive to change how the EZ operates – its economy is doing just fine, thank you very much, and its export sector would be badly damaged by the rise in value of the Euro that would accompany a resolution of the crisis.

I personally would have no problem with some sort of fiscal controls in treaty form if, and only if, they were accompanied by a re-calibration of the ECB’s overly simplistic focus on inflation and some form of banking union.

As an aside, because of the blind, simultaneous austerity in ALL countries that will likely emerge because of the treaty rules, even on the narrow remit of the treaty (namely fiscal policy) it fails to deliver sound policy.

The solutions at hand are not about austerity versus growth or balancing the books versus fiscal incontinence. We need inflation in the core AND savings in the periphery. We need bank resolution and debt restructuring AND fiscal stability.

Why on earth would we sign-up to something that delivers only for Germany but doesn’t help us at all? It will reduce even further the incentives for Germany to play ball on the bank bailout costs, which is the single most important issue facing the country.

It is bad enough to have to listen to the “There Is No Alternative” arguments, but at least that position is intellectually honest (but not correct). It is far worse to have to listen to supposedly well-informed economists and commentators turning themselves inside out trying to find virtue in this treaty, when there is none.

@David
We are in deep trouble…. the No side will not admit to the scale of this leveraged damage , they claim we will not be nibbled even further by the IMF vultures.
But what the Yes side will not admit is the transfer union (to the core) that this fiscal thingy will cement.
A No vote will bring on a Famine withen 20 years or so.
Act of Union / Maastricht
Napoleonic depression / 2007 crash , depression (~20 years)
Irish Famine / modern Irish famine (~20 years)

“Do you think she would pick up the tab for 50% of the household budget to bail out the siblings? Not on your nellie – she would have simply bankrupted them.”

Simply hoping the Germans will bail out the periphery is reckless and foolish. Yet eurobonds or a variant the more Angela Merkel in Germany or Geert Wilders Party for Freedom opposes any increase or systematisation of transfer payments, the more the clamour for these transfers occurs. Its a currency credit union, why should members in surplus pay for the liabilities of those they regard profligate?But there is no plan on the table for any of this. Its pure fantasy to suggest there might be.

The only plan is austerity and pay back what you owe. But there is plenty of fantasy about. Retail sales have fallen again, mortgage default is on the rise, NAMA is failing, the banks are under water for another ¢5 bn; previous bailout is a fail, we need another bailout. Europe itself with Spain joining the queue will ensure no relaxation of penal and punitive bailout terms.

We are one of the most underwater economies in Europe, but the truth is hidden from the people. A Faustian Pact Govt has made with the financial conceals another bailout of the banks it will shortly extract from taxpayers; drip fed the nonsense of growth and stability the electorate are brain washed to vote Yes with shallow mantras on stability and growth. The only way that will come about is through default. Its not possible to imagine our way out of fiscal difficulties through voting Yes.

It is possible in real terms to vote No and demand a realistic debt writedown that will make our economy viable once again.

ITs highly likely by voting Y you will be voting for extra austerity; that there will be an asset grab for FTT, CT or reductions to CAB. ITs highly likely that voting Y will send this country into a state of economic suspended animation drip fed enough to keep its debt repayment engines turning over while its people are sent into debt peonage penury in a two tier Europe.

But, if you believed our benighted government, voting Yes is the road to stability and prosperity.

Any ideas what this ‘Dublin to Brussels’ project could be in reference to?

‘According to an internal European Commission priority list that SPIEGEL has obtained, some of the projects directly involve France. They include construction of the TGV high-speed rail line between Lyon and Turin, the Seine-Northern Europe canal in the corridor between Amsterdam and Marseilles and the expansion of travel routes between DUBLIN and Brussels’

@Michael Hennigan
thanks for the response Michael. So what’s your interpretation of Iceland, I was reading Cormac Lucey at the weekend attributing Iceland’s recent, relative, success to devaluation. Do you really think that France, Spain etc can achieve +/-20% deflation? That’s one hell of an amount of human suffering.

Interesting take on clever Ireland…
“1.09pm: Asked about the need to modify eurozone bailout mechanisms to allow direct bank recapitalisations , Spanish prime minister Rajoy agreed, presumably because his real intention at some stage is a backdoor re-financing by the ECB.

Some commentators cannot understand why he has refused to send Bankia directly to the ECB in search of the capital it needs.

Control is one issue. The Irish have devised clever schemes with their banks such that they delay indefinitely the interest on small parcels of debt held with its own central bank, sanctioned by the ECB. Maybe the Spanish want to concoct something similar.”

Dublin to Brussels ? I suppose they will need extra seats when the functionaries from Brussels take over completely. Enda can look after mayo and Mickey will have limerick.

One of the most distressing findings from the past few years, with a few notable exceptions, is the servile, supine, don’t rock the boat, hide under the desk, say f*ck all, nature of our intelligentsia – especially in the Universities.

The Irish public sphere is so weak that its Citizenry has been sold into financial_system serfhood and it does not even realise that its status has changed from citizen to serf: the century old in-bred upper_echelons have been bought and remain in proxy control. Swift’s recipe for the childer of the nation has been silently achieved – and not a single shot fired.

“It looks like game over for the sovereign and the financial sector at the same time.

“Unless we get a Deus ex Machina, we’ll be discussing much more seriously the benefits of a return to the peseta in no time,” he said.

It begins.”

I agree, euro’s crisis runs far deeper than the band aid bailout bandages can address. There is an underlying deficit crisis between the competitiveness of the core vs the uncompetitive and stricken periphery unable to address its underlying problems through traditional means; namely, devaluation and default.

Its unrealistic for the core to loan shark the periphery with further debt while the periphery’s internal controls of default and devaluation cannot be mobilised to reduce deficits. This creates a phenomenom of spiraling downwards out of control; savings due to austerity are exported to help pay for the bailouts that are required due to the failure of austerity, a self reinforcing loop. We see this in our own declining GNP and declining retail sale volumes leading to business closures all about us.

The better move is to allow Greece June 2/3 to exit the euro; thereafter a managed default and return to local currencies. Why try to fix a currency model that has failed unless you want it to failMore?

Opportunity in the broken grip of investment banks eg JP Morgan on the financial services sector and global reforms of the carrion banking that has created much of the instability in markets, should be availed of at a G8 level.

An Taoiseach agrees to debate the fiscal corset in a Trappist Monastery – just as soon as Big Phil Hogan and the rest of the Cabinet have been moved temporarily from the monastery to the Mullingar Barracks …

@Kevin
We have no tokens in our pocket (non optimal monetary envoirment) …. it would probally be a waste.
Even much of the French investment is little used outside Paris because they don’t use Francs anymore.
Even some investments in the Paris basin is little used.
This spur line now using some new surplus TramTrains from line T4 carries less then 1,000 people a day ! in a energy crisis !!…. hint we have a GLOBAL energy crisis because of the Euro as it uses resourses very inefficiently.

It’s kind of amazing how out of sync the Irish discussion is with Europe. it’s kind of unnerving really, nothing about how we see Europe or where we want Europe to be. Nothing about our commitments under ESM, or the implications of the ESM for Europe or us. Most likely because the European project is seen as a one way cash cow that we couldn’t possibly lose out on.

Following on from this, the establishment has made a judgement that if Germany gets what she wants then she might allow some kind of relief, most likely bank debt relief, that’s it, that simple, and fear is used as the stick to beat it in to people. ‘don’t want to be the Greeks’ has replaced the ‘don’t want to be Iceland’ a few years back.

Running along side this we have a poor media , who fail to keep citizens abreast of the reality of the situation, the lack of meaningful reform of our rent seeking/professional sectors and the threat that continued membership of the euro itself brings. Tjhe Spanish seem to be heading down the privatise private bank debt road already. Hollande has suggested the ESM be involved we don’t know if it’s electioneering on his part but either way the Germans and as importantly the Spainish are against him.

Germany may recognise the need for sharing the pain of the crisis with us the PIIGS but she will most likely do so on her terms and at a slow pace. Spanish unemployment levels or Greek social destruction doesnt worry her much. I can’t see how our bank debt troubles or more importantly our unemployment problem will, particularly if our electorate give the thumbs up to a German treaty.

The yes campaign is based on faith alone, with mantras and platitudes about growth being ‘around the corner’ akin to prayers and dashings (soon to be dollips) of austerity as our penance. Perhaps this faith isn’t misplaced but can we afford to wait and see? Hollande appears as the only hope to accelerate matters.

Otherwise Punt Nua, though more painful in the short term looks more likely to be a faster solution and more importantly, more appealing for our children and their future.

I sorry, but the core point that’s forgotten in all this is that TRADE is the thing, not wealth. At the moment the focus is on wealth in the same way a farmer thinks about wealth. Ask what the true difference between Spain in the 19th century and Britain at the same time and your answer is a focus on trade.

“Dublin to Brussels…A high speed rail link from Holyhead to Birmingham would do me very nicely, thanks.”

No problem, terrific idea, but we need to rejoin Sterling first. Obviously, because of latent hysteresis effects as we negotiate down our HerMerkelian debt through International Court of Banking Settlements, there will be some delay. But this will be top of the list an agenda with Cameron et al, who is in favour.

It should lead to considerable growth in economic activity between the two cities. The Nama will have to be involved, many of Irish extraction in Bermingham especially those in Bermingham university sector, may be interested in as well.

The wall of debt surrounding the 26 counties constructed by Troika will be dismantled as part of this exercise, unfortunately, we havn’t a jack in the beanstalk hope of beginning this project in the near future because of Yes bindings to ECJ we agreed to in an unfortunately mistaken Yes vote.

If the ECB/ Germany insists that all banks debt must be paid for by the sovereign, then the logic is to take all State banks into custodianship.
Then haircut all bondholders to the point where the banking system is in rude health.
The idea that the State (i.e the citizenry) must recapitalise banks in trouble while leaving profitable banks untouched is nothing other than highway robbery of the citizens of those countries that have the misfortune to have bad banks regulated in their jurisdiction.

Spain should go for it. There Sate borrowings are not high. They have a real opportunity to sort out their mess.
Regrettably, they appear to be heading in the direction of Ireland.

Personally, I do not think they will do an Ireland. They cannot afford to.
And they have the answer in their grasp. If they have the guts.

@Joseph
If Spain tries to burn the bondholders they will find themselves in exactly the same place as little old Ireland. They have 270b in LTRO so how do they replace that overnight. Maybe Mario won’t be as trenchant as Trichet but somehow I doubt it.
The ECB may have designed the LTRO with a view to having leverage over all the Eurozone especially the ones with bad banks and the clout to act in their own self interests.

On your most recent post, the ECB is trying manfully to maintain the distinction between banking liquidity and solvency, the first being its responsibility, the second being that of governments (as we know to our cost).

@Colm
Now now…. there are more special people then us….. even the French people realise there is a even more special people then themselves (although they don’t like it)
They are called Parisians.
This project is in a advanced planning stage and is the equilivent of of 2 reactors (maybe 1 French reactor)
en.wikipedia.org/wiki/Arc_Express

A more charitable way of looking at this is that they want to export their oil surplus to the periphery so that they can continue to earn a interest income from our activities , much like the post 1987 period…… not sustainable really and it looks on us as mere conduits rather then users of capital.

However I would have to accept -Its probally a more cost effective method of saving oil(withen the euro) given our piss poor planning and dispersed population pattern.

Well, that’s the end of the euro then. We went through all that nonsense before with our banks denying a solvency problem.

If Germany won’t pay up to make debt good on the solvency side, the name of that game is Default for the peripherals. That’s exactly what we got from Troika; they believe we have a solvency problem, they can dredge out our assets under ‘bailout’
while we pretend we can assist them and there won’t be a solvency default problem.

Although privately I’m guessing Chopra and IMF know the game is up for us unless Germany does what it is not going to do.

That’s why Enda Kenny is leading the Charge of the Light Brigade into default because he cannot grasp the fundamental significance of this point. He believes they’ll dig him out of his bunker hidey hole, not so!

“…..the ECB is trying manfully to maintain the distinction between banking liquidity and solvency…”

From what I see LTRO was distributed to all and sundry if they had collateral. Obviously solvency didn’t enter the equation if the likes of Bankia got it as they are and were hopelessly insolvent. The big question is how many more Spanish banks are insolvent.
Only two weeks ago we were told Bankia needed 5b now it is 24b..as somebody said today, the Spanish authorities have lost all credibility.

Don’t want to go into the whole LTRO thing but I’m sure many of us agree it merely dealt with a resolution of banking problems on the liquidity side. Many of these target banks are insolvent. Bancia in Spain is the tip of the iceberg. Neither Germany nor ECB are in the business of putting any solutions on the table to deal with the insolvency of these banks. They’ll pour money in but will stop at the point of transfer of real funds to address the real problems faced by these banks. Even the reach of the ESM about ¢80 b, approx 27% funded by Germany with expected leverage of ¢500 through some form of a CDO device, the kind of financial trickery that led to sub prime defaults in the US in the credit bubble, the eurozone’s rescue fund does not have enough to solve the real problem of insolvency. These banks are insolvent, they cannot be rolled up and taken over by sovereign governments who can then borrow and make them solvent through magic. These banks will bring down the sovereign….Spain. Solving the problems of Irish and Spanish and Greek banks would demand a transfer of real funds from Germany. The German people will not agree to this.

@Kevin Donoghue speaks out on the tragedy of Irish economic self determination in the early nineties.

@Frank Barry: “Ireland succumbed to devaluation in January 1993.”

What a tragedy that turned out to be. Thousands were deprived of the spiritual growth which flows from prolonged unemployment as the nation grappled with the hideous problem of being a highly competitive exporter.

In any self respecting blog the thread would have been closed and you would have been acknowledged as the winner.

For once I agree with you. The Devaluation of 1993 was a great victory for the Irish people. BTW, the dirty little secret is that it was engineered by the Germans. Our elite corps in the DOF thought it was a great evil. They even predicted 7 calamities would occur if we devalued…100% were wrong.

I was reading Cormac Lucey at the weekend attributing Iceland’s recent, relative, success to devaluation.

Iceland is a great example to quote but an analysis of trade tells a different story – – conventional wisdom is repeating the apparently obvious but it’s very often wrong.

The biggest rise in exports in recent years predated their bust in Q4 2008.
Aluminum exports jumped 127% in 2008 and volume increased 71%. US giant, Alcoa, opened a new smelter in East Iceland in mid 2007 before the króna plunged.

Ireland’s headline data is often quoted but it’s more often than not very misleading.

No on deflation — just quoting GS figures.

Competitiveness helps but in itself, it’s no panacea.

The UK has little to show for the more than 20% weighted depreciation of sterling in recent times — many haven’t twigged to the fact that a global market today means just that and there are no free lunches.

The number of passenger vehicles per 1,000 people in India and China is just 10 and 27, respectively, compared with 502 in Germany and 451 in the United States.

Which country is likely to gain from a rise in foreign demand: France or Germany?

France has run a trade deficit every year since 2002 – – how lucky Chile and Australia are that France left them capture the European supermarket wine market without a fight?

MH,
A good thought provoking post illustrating that it is not all about price. However , if Ferraris were 20% cheaper due to a currency deval then the Chinese would hoover them up? Cooler cars!
Does not the loss of share of French wine illustrate that a lower priced product properly marketed can run the table?

The A6 is popular with party officials (useful idiots in the West take note) but the Bo Xilai scandal has triggered concern about the message conveyed to the public of high-living public officials.

Devaluation can be useful if other policies are put in place to promote sustainable growth. How would ESB workers react to a 15% inflation rate in Ireland — do their patriotic duty as ever?

Southern Hemisphere wine generally has a higher alcohol content — generally 14 proof but the main problem with the output of many small chateaux is that most people wouldn’t recall the name of a particular label compared with for example Jacob’s Creek or Casilero del Diablo.

Blue Nun and Pedrotti by the gallon served the purpose when we had less and were we deprived?

what would you have the ecb do? germany is ovahteering, growing at China-like rates. a benchmark rate of 1.25% is clearly inappropriate. unlike the fed, the ecb has one mandate price stability. it’s laughable to suggest that 100 basis points this way or that way is the cause of any difficulties faced by the EU periphery.